The Fed's Cash Machine

As the housing collapse has turned into a financial crisis, and the financial crisis into an economic calamity, the government has tried furiously to keep the country free of breadlines and trash-can fires. Two of its interventions—the $700 billion bank bailout known as TARP and the $787 billion stimulus package—have inspired levels of partisan acrimony and journalistic scrutiny befitting a war vote. But neither of those initiatives, expensive as they are, approach the civic munificence displayed by the Federal Reserve.

In the past year, the Fed has undertaken interventions in the economy broader and deeper than anything attempted since its founding in 1913. And with the credit system paralyzed, the central bank increasingly looks like the lender of both first and last resort. But the Fed’s actions have stirred nothing like the debate surrounding TARP or the stimulus (pictured in detail below). And the particulars of its schemes remain almost entirely obscure.

Through a dozen programs introduced since the crisis began, the Fed will be on the hook for trillions of dollars in loans, bailouts, and asset purchases. The government expects to be repaid for most of these commitments, of course, with interest. But that’s the tricky part. Largely unencumbered by congressional meddling, the Fed has in most cases refused to reveal the beneficiaries of its largesse—or what assets they’ve used as collateral—lest panicky investors and depositors lose faith. As a result, outside the walls of the Eccles Building, almost no one knows how sound those loans really are.

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